Statement to the Ministerial Roundtable III by the Civil Society FfD Group (including the Women’s Working Group on FfD), delivered by Andrew Itai Chikowore, Action Aid and Society for International Development on May 23, 2017 (FfD Forum 2017)
Thank you chair. I am speaking on behalf of ActionAid, the Society for International Development and the larger CSO FfD Group. My intervention will focus on the need for progressive taxation for tackling poverty and inequalities.
We are concerned about the trend of tax systems in low income countries becoming increasingly reliant on the often regressive consumption taxes, especially as we observe corporate tax avoidance reducing potential revenue from more progressive corporate income taxes. Progressive and effective tax systems are key to fighting economic and social inequalities and funding essential public services, such as health and education. Tackling corporate tax avoidance, as well as other illicit financial flows, is key to building such systems. In this aspect, we would like to highlight the importance and relevance of the recommendations of the report of the High-Level Panel on Illicit Financial Flows. I would like to also highlight two areas of particular concern in relation to taxing multinational companies in developing countries: tax incentives and tax treaties.
Tax incentives cost developing countries significant amounts in forgone revenue every year, while often there is little evidence to their effectiveness in terms of jobs creation and supporting sustainable development through increased foreign direct investments. It is crucial that countries develop strong frameworks on tax incentives, including cost-benefit analyses and monitoring of their use and effectiveness. Regional and international cooperation on this topic is also of paramount importance, if the race to the bottom in corporate tax rules and rates, driving the excessive use of tax incentives, is to be effectively addressed.
Double taxation treaties, while intended to limit double taxation, too often excessively limit developing countries’ taxing rights and – in some cases – leading to double non-taxation, lowering overall corporate tax revenues. We would like to take the opportunity to express our appreciation of the work of the UN Committee of Experts on International Tax Matters in this important area and remind the importance of further strengthening the work of the Committee.
However, if this problem is to be addressed, there is a need for a more inclusive, global space for political dialogue on international taxation. This is why we continue to support the creation of an intergovernmental tax body under the auspices of the UN, where this and other important issues concerning international taxation could be discussed and addressed, supporting the development of progressive national tax systems and fairer global tax rules that contribute to fighting inequality and delivering of the Sustainable Development Goals.